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Have Bears Strengthened Their Grip on SWK?

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Stanley Black & Decker’s short interest

The May 15 short interest figures show that Stanley Black & Decker (SWK) has pulled back from highs over the previous report but continues to be on the higher side, indicating that the negative sentiments have gripped the stock and bears appear to have gained the upper hand. As of May 15, SWK’s short interest as a percentage of its outstanding shares was 2.0% compared to 2.3% in the previous report. However, it is still higher than 1.2% as per the report on January 12. During this period, its stock price has declined from $173.42 to $142.18.

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SWK’s short interest increased dramatically after its first-quarter earnings. Although the earnings and revenues beat Wall Street expectations, the downward revision of the GAAP EPS (earnings per share) from $7.80–$8.00 to $7.40–$7.60 didn’t go well with investors. As a result, the stock witnessed a sell-off.

Short interest ratios of SWK and its peers

On May 18, Ashland’s short interest was 3.2 million shares, and its average trading volume was 1.3 million shares, implying a short interest ratio of 2.36x. This ratio indicates that it would require approximately two days to cover all the stock’s short positions. Let’s look at the short interest ratios of its peers:

  • Honeywell’s (HON) short interest was 6.9 million shares, and its average number of shares traded was 2.8 million, meaning its short interest ratio was 2.47x. It would take two days to cover all its short positions.
  • 3M’s (MMM) short interest was 7.6 million shares, and its average number of shares traded was 2.9 million, meaning it would take three days to cover all its short positions.
  • General Electric’s (GE) short interest ratio was 1.91x, which means it would take nearly two days to cover all its short positions.

The PowerShares Dynamic Large Cap Growth Portfolio (PWB) provides an opportunity for investors to indirectly hold Stanley Black & Decker. The fund has invested 1.3% of its portfolio in Ashland.

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